UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):  November 14, 2019
 
QUEST RESOURCE HOLDING CORPORATION
(Exact Name of Registrant as Specified in Charter)

Nevada	 	001-36451	 	51-0665952	
(State or Other Jurisdiction
of Incorporation)	 	(Commission File Number)	 	(IRS Employer
Identification No.)	
 
3481 Plano Parkway
The Colony, Texas	 	75056	
(Address of Principal Executive Offices)	 	(Zip Code)	
Registrant’s telephone number, including area code: (972) 464-0004
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)	
☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)	
☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))	
☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))	
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
  Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ☐
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class	 	Trading
Symbol	 	Name of each exchange on which registered	
Common stock, $.001 par value	 	QRHC	 	NASDAQ	

 

 
Item 2.02.  Results of Operations and Financial Condition.
We are furnishing this Current Report on Form 8-K in connection with the disclosure of information, in the form of the textual information from a press release released on November 14, 2019.
The information in this Current Report on Form 8-K (including the exhibit) is furnished pursuant to Item 2.02 and shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section.
We do not have, and expressly disclaim, any obligation to release publicly any updates or any changes in our expectations or any change in events, conditions, or circumstances on which any forward-looking statement is based.
The text included with this Current Report on Form 8-K is available on our website located at www.qrhc.com, although we reserve the right to discontinue that availability at any time.
 
Item 9.01.  Financial Statements and Exhibits.
 	(a)	Financial Statements of Business Acquired.	
Not applicable.
 	(b)	Pro Forma Financial Information.	
Not applicable.
 	(c)	Shell Company Transactions.	
Not applicable.
 	(d)	Exhibits.	
 
Exhibit
Number	 	Exhibits	
99.1	 	Press Release from Quest Resource Holding Corporation, dated November 14, 2019, entitled “Quest Resource Holding Corporation Reports Third Quarter 2019 Financial Results”  	

 

 
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
Date: November 14, 2019	 	 	 	QUEST RESOURCE HOLDING CORPORATION	
 	 	 	 	
 	 	 	 	By:	 	/s/ S. Ray Hatch	
 	 	 	 	 	 	S. Ray Hatch
President and Chief Executive Officer	

 
Exhibit 99.1

Quest Resource Holding Corporation Reports Third Quarter 2019 Financial Results
 
THE COLONY, TX – November 14, 2019 -- Quest Resource Holding Corporation (NASDAQ: QRHC) ("Quest"), a national leader in environmental reuse, recycling, and waste disposal services, today announced financial results for the third quarter ended September 30, 2019.
Third Quarter 2019 Highlights

•	Revenue was $23.9 million, a 7.7% decrease compared with the third quarter of 2018.	
•	Gross profit was $4.8 million, a 6.7% increase compared with the third quarter of 2018.	
•	Gross margin increased 270 basis points to 19.9% compared with 17.2% of revenue for the third quarter of 2018.	
•	Net income per share was $0.00, an improvement compared with a net loss per share of $(0.04) during the third quarter of 2018.  	
•	Adjusted EBITDA was $860,000, a 27.5% increase compared with the third quarter of 2018.	
September 30, 2019 Year-to-Date Highlights

•	Revenue was $76.0 million, a 3.2% decrease compared with the same period of 2018.	
•	Gross profit was $14.1 million, a 13.0% increase compared with the same period of 2018.	
•	Gross margin increased 270 basis points to 18.5% compared with 15.8% of revenue for the same period of 2018.	
•	Net loss per share improved to $(0.01), including $248,000, or $0.02 per share, of expenses related to our April 2019 equity offering by selling shareholders, compared to $(0.17) during the same period of 2018.  	
•	Year-to-date Adjusted EBITDA was $2.5 million, a 58.2% increase compared to the same period of 2018.	
Key Recent Highlights

•	New sales leadership - Quest appointed Matthew C. Lewis as Senior Vice President of Sales. Mr. Lewis brings more than 30 years of experience in sales and operations leadership in complex end markets within the waste and environmental services industry.  	
“We delivered record gross profit and 27% growth in Adjusted EBITDA during the quarter, reflecting our continued success in transitioning our business to focus on providing higher value-added solutions to our customers.  As previously discussed and expected, our transition away from lower value-added solutions has resulted in challenging revenue comparisons relative to prior periods,” said S. Ray Hatch, President and Chief Executive Officer.  “With solid year-to-date performance, we believe we are on track to meet our profitability goals for 2019, which include 10%+ growth in gross profit.  We continue to find acceptance across multiple end markets, including the food service vertical where recent wins provide us with an opportunity to demonstrate our differentiated and compelling value proposition.  We also have additional growth opportunities with our existing customers who value our flexible solution offerings and the service levels we provide.”
Third Quarter 2019 Earnings Conference Call and Webcast
Quest will conduct a conference call Thursday, November 14, 2019, at 4:00 p.m. Central Time, to review the financial results for the third quarter ended September 30, 2019. Investors interested in participating on the live call can dial 1-800-289-0438 within the U.S. or 1-323-794-2423 from abroad.  The conference call, which may include forward-looking statements, is also being webcast and is available via the investor relations section of Quest’s website at www.QRHC.com. A replay of the webcast will be archived on Quest’s investor relations website for 90 days.
Reconciliation of U.S. GAAP to Non-GAAP Financial Measures
In this press release, a non-GAAP financial measure, "Adjusted EBITDA," is presented. From time-to-time, Quest considers and uses this supplemental measure of operating performance in order to provide an improved understanding of underlying performance trends. Quest believes it is useful to review, as applicable, both (1) GAAP measures that include (i) depreciation and amortization, (ii) interest expense, (iii) stock-based compensation expense, (iv) income tax expense, and (v) certain other adjustments, and (2) non-GAAP measures that exclude such items. Quest presents this non-GAAP measure because it considers it an important supplemental measure

of Quest's performance. Quest's definition of this adjusted financial measure may differ from similarly named measures used by others. Quest believes this measure facilitates operating performance comparisons from period to period by eliminating potential differences caused by the existence and timing of certain expense items that would not otherwise be apparent on a GAAP basis. This non-GAAP measure has limitations as an analytical tool and should not be considered in isolation or as a substitute for the Company's GAAP measures. (See attached table "Reconciliation of Net Income (Loss) to Adjusted EBITDA.")
About Quest Resource Holding Corporation
Quest is a national provider of reuse, recycling, and disposal services that enable our customers to achieve and satisfy their environmental and sustainability goals and responsibilities.  Quest provides businesses across multiple industry sectors with single source, customer specific solutions to address a wide variety of waste streams and recyclables generated by their operations.  Quest also provides information and data that tracks and reports the environmental results of Quest’s services, provides actionable data to improve business operations, and enables Quest’s customers to achieve and satisfy their environmental and sustainability goals and responsibilities. For more information, visit www.QRHC.com.
Safe Harbor Statement
This press release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, which provides a "safe harbor" for such statements in certain circumstances.  The forward-looking statements include, but are not limited to, our belief we now target the right markets with the right services; our belief we have operations in place to sustainably support profitability while consistently providing excellent customer service; our belief that our efforts have positioned us well to grow sales at our targeted rate of 10% to 15% per year; our expectation profitability will continue to grow at an even faster pace, at our current business levels, coupled with the operating leverage inherent in our business model; and our belief  that the financial measures contained in this press release facilitate operating performance comparisons from period to period.  Words such as “anticipate,” "estimate," "expect," "project," "intend," "plan," "predict," "believe" and similar words, expressions and variations of these words and expressions are intended to identify forward-looking statements. These statements are based on our current expectations, estimates, projections, beliefs, and assumptions.  Such statements involve significant risks and uncertainties.  Actual events or results could differ materially from those discussed in the forward-looking statements as a result of various factors, including, but not limited to, competition in the environmental services industry, the impact of the current economic environment, and other factors discussed in greater detail in our filings with the Securities and Exchange Commission (“SEC”), including our Annual Report on Form 10-K for the year ended December 31, 2018, our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K.  You are cautioned not to place undue reliance on such statements and to consult our SEC filings for additional risks and uncertainties that may apply to our business and the ownership of our securities.  Our forward-looking statements are presented as of the date made, and we disclaim any duty to update such statements unless required by law to do so.
Investor Relations Contact:
Three Part Advisors, LLC
Joe Noyons
817.778.8424
 
Financial Tables Follow

Quest Resource Holding Corporation and Subsidiaries
STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
 
 	 	Three Months Ended	 	 	Nine Months Ended	 		
 	 	September 30,	 	 	September 30,	 		
 	 	2019	 	 	2018	 	 	2019	 	 	2018	 	
Revenue	 	$	23,926	 	 	$	25,920	 	 	$	76,020	 	 	$	78,545	 		
Cost of revenue	 	 	19,154	 	 	 	21,450	 	 	 	61,956	 	 	 	66,099	 		
Gross profit	 	 	4,772	 	 	 	4,470	 	 	 	14,064	 	 	 	12,446	 		
Selling, general, and administrative	 	 	4,221	 	 	 	4,638	 	 	 	12,663	 	 	 	12,269	 		
Depreciation and amortization	 	 	330	 	 	 	407	 	 	 	982	 	 	 	2,373	 		
Total operating expenses	 	 	4,551	 	 	 	5,045	 	 	 	13,645	 	 	 	14,642	 		
Operating income (loss)	 	 	221	 	 	 	(575	)	 	 	419	 	 	 	(2,196	)		
Interest expense	 	 	119	 	 	 	106	 	 	 	344	 	 	 	336	 		
Income (loss) before taxes	 	 	102	 	 	 	(681	)	 	 	  75	 	 	 	(2,532	)		
Income tax expense	 	 	55	 	 	 	—	 	 	 	165	 	 	 	—	 		
Net income (loss)	 	$	47	 	 	$	(681	)	 	$	(90	)	 	$	(2,532	)		
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 		
Net income (loss) applicable to common stockholders	 	$	47	 	 	$	(681	)	 	 
$	 
(90	 
)	 	 
$	 
(2,532	 
)		
Net income (loss) per common share:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 		
Basic	 	$	0.00	 	 	$	(0.04	)	 	$	(0.01	)	 	$	(0.17	)		
Diluted	 	$	0.00	 	 	$	(0.04	)	 	$	(0.01	)	 	$	(0.17	)		
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 		
Weighted average number of common shares outstanding:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 		
Basic	 	 	15,350	 	 	 	15,313	 	 	 	15,340	 	 	 	15,308	 		
Diluted	 	 	15,399	 	 	 	15,313	 	 	 	15,340	 	 	 	15,308	 		

RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA
(Unaudited)
(In thousands)

 	 	Three Months Ended	 	 	Nine Months Ended	 	
 	 	September 30,	 	 	September 30,	 	
 	 	2019	 	 	2018	 	 	2019	 	 	2018	 	
Net income (loss)	 	$	47	 	 	$	(681	)	 	$	(90	)	 	$	(2,532	)			
Depreciation and amortization	 	 	354	 	 	 	452	 	 	 	1,056	 	 	 	2,509	 			
Interest expense	 	 	119	 	 	 	106	 	 	 	344	 	 	 	336	 			
Stock-based compensation expense	 	 	285	 	 	 	188	 	 	 	758	 	 	 	594	 			
Other adjustments	 	 	—	 	 	 	610	 	 	 	248	 	 	 	662	 			
Income tax expense	 	 	55	 	 	 	—	 	 	 	165	 	 	 	—	 			
Adjusted EBITDA	 	$	860	 	 	$	675	 	 	$	2,481	 	 	$	1,569	 			

 
BALANCE SHEETS
(In thousands, except per share amounts)
 
 	 	September 30,	 	 	December 31,	 	
 	 	2019	 	 	2018	 	
 	 	 	(unaudited)	 	 	 	 	 	
ASSETS	 	 	 	 	 	 	 	 	
Current assets:	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	$	2,069	 	 	$	2,122	 	
Accounts receivable, less allowance for doubtful accounts of $751
and $929 as of September 30, 2019 and December 31, 2018, respectively	 	 	14,237	 	 	 	16,712	 	
Prepaid expenses and other current assets	 	 	1,239	 	 	 	966	 	
Total current assets	 	 	17,545	 	 	 	19,800	 	
 	 	 	 	 	 	 	 	 	
Goodwill	 	 	58,208	 	 	 	58,208	 	
Intangible assets, net	 	 	1,853	 	 	 	2,611	 	
Property and equipment, net, and other assets	 	 	2,688	 	 	 	968	 	
Total assets	 	$	80,294	 	 	$	81,587	 	
 	 	 	 	 	 	 	 	 	
LIABILITIES AND STOCKHOLDERS’ EQUITY	 	 	 	 	 	 	 	 	
Current liabilities:	 	 	 	 	 	 	 	 	
Accounts payable and accrued liabilities	 	$	13,514	 	 	$	15,778	 	
Deferred revenue and other current liabilities	 	 	16	 	 	 	72	 	
Total current liabilities	 	 	13,530	 	 	 	15,850	 	
 	 	 	 	 	 	 	 	 	
Revolving credit facility, net	 	 	4,228	 	 	 	5,194	 	
Other long-term liabilities	 	 	1,295	 	 	 	—	 	
Total liabilities	 	 	19,053	 	 	 	21,044	 	
 	 	 	 	 	 	 	 	 	
Commitments and contingencies	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
Stockholders’ equity:	 	 	 	 	 	 	 	 	
Preferred stock, $0.001 par value, 10,000 shares authorized, no
shares issued or outstanding as of September 30, 2019 and December 31, 2018	 	 	—	 	 	 	—	 	
Common stock, $0.001 par value, 200,000 shares authorized,
15,350 and 15,329 shares issued and outstanding as
of September 30, 2019 and December 31, 2018	 	 	15	 	 	 	15	 	
Additional paid-in capital	 	 	160,490	 	 	 	159,702	 	
Accumulated deficit	 	 	(99,264	)	 	 	(99,174	)	
Total stockholders’ equity	 	 	61,241	 	 	 	60,543	 	
Total liabilities and stockholders’ equity	 	$	80,294	 	 	$	81,587	 	
 
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